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Are you happy with your Trust Deed Company?

15th November 2010

In our recent trust deed survey we set out to find whether our members and visitors are happy with the Scottish trust deed companies they have chosen. Our trust deed forum includes many stories from visitors where problems with the trust deed process were apparent. We wanted to establish what percentage of those who had dealt with such companies were actually satisfied with the services they had received. We asked:

“If you have already had dealings with a trust deed company, how would you rate the service provided to you?”

Of those that expressed an opinion the results were:

Excellent: 30%

Reasonably Good: 27%

OK: 16%

Poor: 19%

Extremely Bad: 8%

There are two clear interpretations of the survey results which we think are of interest:

  1. The great majority of people who have had dealings with trust deed companies are satisfied with the service they receive. The total of those rating the service as being OK, good or excellent is 73%. Clearly the majority of trust deed companies are performing well on behalf of their clients.
  2. A very significant minority of people who have dealt with trust deed companies are unhappy about the service they have received. The total of those rating the service received as poor or extremely bad was 27%. This shows that a minority of trust deed companies are not providing a service valued by their clients.

In this article we will look at some of the common reasons for dissatisfaction, why some trust deed companies do a better job than others, and how you can seek out a good company if you are considering a protected trust deed.

What can go wrong with trust deeds?

The Trust-Deed.co.uk forum is enlightening in terms of the problems some people are experiencing with trust deed companies.

The primary source of problems is a failure to properly explain how any equity will be dealt with. If equity exists in a home it will generally need to be released for the benefit of creditors. This is in addition to the agreed monthly payments. It’s apparent that certain trust deed companies gloss over the subject with statements such as, “your home will be safe if you take out a trust deed” rather than a full explanation that the money must be found before the trust deed ends, that a remortgage might not be available to do this, that friends or family might have to find the money and, if they cannot, then the home may be sold.

Similar difficulties regarding cars are also often raised on the forum. Many people require cars for commuting purposes. However, if the car is of significant value (modestly valued cars do not pose a problem) then a payment in lieu of this will need to be made. Where this isn’t explained in advance people often find they are being asked to provide significant sums of money when they thought their payments were complete.

Some companies have apparently been unclear about what will happen if additional income is earned or if someone comes into a lump sum (perhaps as a result of inheritance or redundancy). Some individuals earn overtime or bonus payments that were not factored into their agreed trust deed payments. When this is discovered some or all of this extra money will need to be paid into the trust deed. Someone who has not been made aware of this fact may spend the money, only to find themselves in a very difficult position. Some people are made redundant after many years with an employer. They can be shocked to find that the bulk of their settlement needs to be paid into the trust deed. It’s certainly fair that extra unexpected money should be used to help repay the debts in a trust deed, but it is also fair that anyone entering a trust deed should have had this explained to them in advance.

Very high fee levels are a potential issue with trust deed companies; in some instances reported on our forum nothing has been left for the creditors. In one recent case two visitors to the site were quoted such extraordinarily high fees for their trust deed that the arrangements would have lasted five years (rather than the usual three) to ensure the trust deed company would have enough time to collect their own fees.

More recently, some trust deed companies have decided to force their clients into making PPI claims or “unenforceable contract” claims against their creditors. This may have the effect of creating long delays in the closure of a trust deed while the claims are made and processed.

A couple of trust deed companies have recently become very slow at closing trust deed cases, leaving their clients waiting for many months before being discharged. A cynical view of this situation might be that the companies concerned were prioritising other fee-earning work rather than spending time closing cases where there were no more funds available to draw as fees.

An example of a good trust deed company in practice

As previously stated, 73% of people involved in the survey expressed their satisfaction with the service they had received. Clearly there are plenty of good trust deed companies in operation.

Good trust deed companies go to great lengths to ensure their clients understand their commitments before they go ahead and sign the trust deed. In doing so, they prioritise the client’s interests over and above their own commercial interests.

Equity in cars and houses is a prime area where this can be seen. Good trust deed companies will fully explain the responsibility that someone has to deal with equity before they ever sign the trust deed. They will also put this in writing to their clients before they sign the trust deed so the client can confirm their understanding and ensure they are protected should there be a dispute.

Good trust deed companies also explain the responsibility a client will have if they earn additional amounts. Often they will agree a percentage of extra earnings will have to be paid into the trust deed, with the remaining percentage being kept by the client. This creates a benefit for all parties as the client can benefit from the hard work, and also has an incentive to earn extra money which will benefit the creditors as well. Good companies will confirm this position in writing before a trust deed is signed.

Only a minority of trust deed companies have pushed their clients into making claims as part of the trust deed process. Put simply, the trust deed companies that receive good client feedback in our forum never do this.

Fee levels are set realistically by the majority of trust deed companies. They tend to start at around £2500 and may rise to around £4500, though these levels will vary from firm to firm, according to client circumstances. A client is paying these fees and has a responsibility to ensure they are reasonable so their creditors can receive at least some of the debt owed to them. Good trust deed companies will provide details of their fees in advance so that clients can confirm they are reasonable.

Good trust deed companies also close cases promptly and efficiently when the payments are complete as they understand the importance to their clients of being able to move on from the trust deed. This process should take only a few weeks from the final payment.

How to find a good trust deed company

Firstly you should ask exactly how your home and car will be treated. The trust deed company should put this in writing before you are expected to sign the trust deed. If they do not, find another trust deed company to avoid future problems.

Demand that the exact detail of what will happen to any extra earnings is stipulated. Expect this to be provided in writing and don’t sign the trust deed until it is.

Ask the company if they have ever encouraged or pressed any client into making a PPI or unenforceable credit contract claim. If they have we would suggest you look for another company. Our experience is that this modus operandi has caused great stress for many clients. You may even wish for it to be put in writing that this will not be forced upon you before you sign the trust deed.

The fee levels should be realistic. If they are not it may reduce the chances of your trust deed becoming a protected trust deed as creditors might object. Get the fee levels in writing before you sign. If they are much above £4500 plus Vat (plus disbursements) ask for the reasons why. There may be good reason for this as more complex cases may require higher fees. However, these higher fees should be justified to you in advance of signing. If they seem unrealistic you may wish to approach another company so you can make a comparison.

Ask how long it takes the trust deed company to close a trust deed. It should not be more than a few weeks. Ask the company how long it is currently taking to close trust deeds where the payments have been completed. If it’s longer than a few weeks we suggest you look elsewhere.

You can choose whichever trust deed company you wish

Many people are referred to trust deed companies by intermediaries. These might be debt charities such as CCCS or the CAB, they could be Money Advisers, debt management companies, debt websites, trust deed websites, financial advisers etc.

If you are referred to any particular trust deed company we strongly suggest you make the same checks that we have previously described to ensure you are treated well by the trust deed company. Remember that commercial organisations making a referral may well be earning a fee for doing so. Did they refer you to the best trust deed company? Or did they refer you to the highest bidder?

No matter who you may have been referred by, and to which trust deed company, you are free to choose whichever trust deed company you wish to assist you.

Trust-Deed.co.uk

Trust-Deed.co.uk features two insolvency practitioner partners represented on the site (and in our forum) by Kevin Mapstone and David Tannock. We heard good feedback about their companies within the industry, visited their businesses to understand how they handle trust deeds, and have received fantastic feedback on their services by visitors to the site.

We freely acknowledge there are many other good trust deed companies available for you to select. These three are simply the trust deed companies we have chosen to feature. However, we also advise readers that some trust deed companies receive consistently poor feedback in our forum (as evidenced by the survey results). A careful choice is very important for anyone considering starting a trust deed.

In our next article connected to the trust deed survey, we will be looking at whether a trust deed strikes a fair balance between a debtor and their creditors.

For further Trust Deed news and information, please visit our forum where we have a wealth of free advice from experienced industry experts.

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Wylie & Bisset Grant Thornton

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